Specifically, the Federal Reserve finally put the kibosh on the third incarnation of its money-printing program — slashing it to ZERO from its initial $85 billion a month pace. The Fed still plans to re-invest the principal payments it gets from existing securities, and roll over maturing Treasuries into new government bonds. But for now at least, QE is dead here in the U.S.

“Household spending is rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Inflation has continued to run below the Committee’s longer-run objective. Market-based measures of inflation compensation have declined somewhat; survey-based measures of longer-term inflation expectations have remained stable.”

Or if you wanted to sum it up in one word, I’d say “Meh.” Things aren’t great. But we aren’t in crisis-mode anymore, either. So crisis-era policy needs to go away. Sounds like something a certain analyst has been saying for, I don’t know, several quarters now?

This afternoon, the Fed announced an end to QE.

The Fed did retain a statement that it plans to keep rates low for “a considerable time,” something Wall Street was watching for. But it qualified the language by saying it really depends on the incoming data. No hawkish Fed members dissented this time. But uber-dove Narayana Kocherlakota of the Minneapolis Fed wanted to promise low rates for longer and push off the end of QE.

Markets are known for trading all over the map in the wake of Fed meetings. We’ll have to see how things settle out in the next couple of days. But the first reaction was for stocks to fall, interest rates (particularly on shorter-term Treasuries) to rise, the dollar to rise, and gold to fall. Why? Because the end of QE represents a further slight tightening in U.S. policy.

Plus, conditions are much worse in several foreign economies — from China to Europe to South America. So even as the U.S. Fed is stepping back from full-bore money printing, others are stepping up.

“Even as the U.S. Fed is stepping back from full-bore money printing, others are stepping up.”

Consider: The European Central Bank (ECB) has been doing everything it can to verbally debase its currency this year in a desperate attempt to spur growth. It could launch an even more aggressive wave of Euro-QE before long, too, despite the utter failure of past attempts to spur strong growth in the real economy.

The Bank of New Zealand recently dumped its kiwi currency — the most since 2007 — to weaken it against the greenback. And this week, the Swedish central bank cut its benchmark rate to 0 percent because of economic weakness and deflation fears over there.

So you still have some central banks enamored with QE and 0 percent rates, even as the Fed is indirectly acknowledging the utter futility of its efforts here! Just consider: The Fed has expanded its balance sheet to more than $4.4 TRILLION from around $800 billion pre-crisis. It placed a particular emphasis on buying mortgage backed securities, saying that would boost the housing market.

So why did applications for mortgages to buy homes just fall to their lowest level in basically the last 19 years? Oh and how about the latest homeownership figures that were released by the Census Bureau yesterday? They showed that the homeownership rate in this country sank to 64.4 percent in the third quarter from 64.7 percent a quarter earlier. That’s the lowest since 1995!

In other words, the Fed’s so-called, whiz-bang interest rate and QE policies — directed specifically at housing and mortgage markets — have delivered Jack Squat for Main Street, even as they’ve helped Wall Street immensely!

Now, let’s hear your take. Is the Fed’s exit from QE a good thing because it means the economy can finally stand on its own two feet? Or is it a bad thing because it could tank the stock market?

Do you think QE has done any good for anyone in the real world, or only the bankers at Goldman Sachs (GS, Weiss Ratings: B+)? And what do you think will happen if we turn off the QE taps — but everyone else around the world keeps them wide open?

In the wake of yesterday’s column on my “Alibaba” (BABA, Weiss Ratings: Unrated) indicator, some of you weighed in with a positive take on the stock.

Reader Richard said: “My comment is on Alibaba. I think their share price will rival Google’s (GOOG, Weiss Ratings: C+) in less than FOUR years. They are bringing small businesses all over mainland China to the internet. Many of my friends are small business owners and have already increased their profit margins and plan to expand their businesses in January 2015. All this is due to Alibaba.com.

“I know China is challenging the entire world. Alibaba will help China achieve their goals.”

Reader Lord B. added: “On the BABA front, I read one commentator who likened it to buying shares of Wal-Mart Stores (WMT, Weiss Ratings: B) when it was an IPO. How many times has it split since then?

“So I bought a few shares at less than $90. If he is correct, in 10 years I could be sitting on a real nest egg to leave my children.”

But could the wild volatility in Alibaba be signaling trouble for the markets? Reader JRJ said: “A quick, scary stock market drop like what happened a couple weeks ago can happen at any time.

“Longer term, we live in a country where most citizens look to government to solve all problems. That means government has the authority to do anything, to supposedly help the economy. The Fed has your back and will devalue the currency, as necessary, to keep real assets appreciating in fiat terms.”

Finally, Reader Howard admitted to being somewhat perplexed. His comment: “It is a good question to ask right now, with everything that is going on. How do you feel being fully invested, partially invested, not invested or money out of sight from taxing authorities? It’s a hard one to answer.”

Difficult indeed, Howard. We’ve seen a very sharp correction, and a very sharp rally — all in the span of just a couple of weeks. I’ve done my best to share what I think will happen and how to react. If anyone else has thoughts to share, do it here!

And the SEC, which overseas market fairness, apparently has a system whereby important company filings are shared a few seconds early with high-paying hedge funds and other fast investors. That allows them to profit ahead of everyone else.

That’s just great. Nice to see Uncle Sam looking out for the little guy, eh?

Ebola-related quarantines remain a hot topic, and now nurse Kaci Hickox is planning to violate rules laid down by the state of Maine.

Maine wants her to stay home for 21 days since she worked as a nurse to Ebola-infected patients for Doctors Without Borders in Sierra Leone. But she believes neither Maine, nor New Jersey where she was first quarantined, have the right to force her to stay home. Your thoughts?

Facebook (FB, Weiss Ratings: B-) face-planted earlier today after projecting fourth-quarter sales that missed the most optimistic estimates. It also said it would have to spend gobs of money on new hires and other things to support new products.

Just one example of possible overspending: The company recently shelled out $22 billion to buy WhatsApp, a mobile messaging company. The company generated a “whopping” $10.2 million in sales in 2013, and lost $138.5 million doing it. Hmm. Remind anyone else of Pets.com’s business model?

An unmanned rocket exploded late yesterday in Virginia, destroying hundreds of millions of dollars in equipment and supplies destined for the International Space Station. No word on the cause, but the effect was for shares of Orbital Sciences (ORB, Weiss Ratings: B+) to lose more than 14 percent at one point.

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Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.

{21 comments }

HGSWednesday, October 29, 2014 at 4:56 pm

As the Federal Reserve stops buying debt and other “liquid” assets like MBS, the Fed. Is now pushing all this onto the banks risking a total meltdown of the financial system much worse than the 2008 credit bubble.

johnWednesday, October 29, 2014 at 5:19 pm

Well , if the rest of the world do QE and the Fed stops the dollar will soar and gold will tank . End of story .

Richard BittleWednesday, October 29, 2014 at 5:20 pm

Six days prior to mid term elections…Is Fed action political engineering? Say what ? Fed political.

DimitreWednesday, October 29, 2014 at 5:22 pm

From banker point of view – all is rosy. From real economy point – they play the 3 monkeys game. The house holds cut further their spending – the gas consumption during July – August with additional 3,23% (ref to class B and C gas tax refunds from DOT).
The bogus inflation the Fed’s are indicating will not survive for long. If the house holds cut further their spending – we are moving toward deflation ( as part of the world is already there. What need to be done
A) decelerate significantly the velocity of money cycle to allow the house holds to start accumulating savings – the old scheme – borrow easy money no longer the general public trust.
B) The over pricing on general scale become national security issue. If the people in the government do not put stop on this, the situation will become very unpredictable.
C) Government shall start taxing with flat fee any wall street transaction to pull the plug on electronic trading
D) Government shall requires up front deposit in the range of 40% from the principle of any derivative contract and futures contracts in order to shrink the 2 quad trillions market
E) Flat tax transaction fee for any currency transaction on direct ratio.
Such actions will bring the wall street very quickly back where is suppose to be – to the real casino as in reality is without effecting the general economy.
F) establish unit measure for pay of any institutional investing – max compensation shall be in relation to minimum wage ( max.comp = number of working days (x) 8 hours (x) 60 minutes (x) minimum wage ). Such ration will establish natural relation between the CEO pay and the low class ( they will be required to grow simultaneously )
G) Government will give 6 months period for all “big to fail” to self disintegrate in small units following the rule – the maximum annual operations = GDP / 365 days – means if any one fail will not required to be bail by the public.
Hope somebody there will start to see the reality

GaryWednesday, October 29, 2014 at 5:37 pm

I would expect that with QE3 ending, the big Wall St. players will be looking for a different market to invade. They are akin to locusts- go in and destroy the landscape, then move on to the next one. Like they did with Oil in the mid 2000’s driving it to $150/barrel, then gold up to nearly $2000/oz., they recently seem to have abandoned those for the Dow and S & P. So maybe oil and or gold will be the new targets again over the next couple of years. I hope you guys at Weiss can help us figure that out.

joanWednesday, October 29, 2014 at 6:06 pm

As far as i can tell, just sank the middle class. Savings rates sank from 5% plus to zero and stayed there for 6 years. I went from middle class to poverty as a result in my retirement yearThe FR meddling has been nothi ng but disaster for anyone without significant assets in the stock market.

Those academic fools and madmen/women should be fired IMV

anthony gWednesday, October 29, 2014 at 6:10 pm

QE was all for the bankers. It was harmful to the real economy. This switch is also for the boys at goldman sachs. Only nature is on the side of the masses.

FredWednesday, October 29, 2014 at 6:36 pm

Governments and economists are horrible at predicting and managing economies. Moscow had 5 year plans that never worked. No more than 2 or 3 of the economists in this country predicted the 2008 bust. And no more than that will get the bigger one coming. She has this all wrong and we will pay. As Anthony noted above…..only GS will get the inside track.

The Keynesians all have their heads up their petuties. Printing money didn’t work in Germany in the 30’s, it didn’t work for Japan for the last 12 years. It hasn’t worked in the US for the past 6 years…. and it won’t work in Europe when they head down the same path. It’s time to follow the Austrian economist theory.
Let the solid businesses succeed and let the crappy ones fail. No more bailouts!! Let prices fall to where a new group of investors will jump in and find he true value of everything! END THE FED!!!
Let the market determine interest rates. Savings interest will rise, and the babyboom generation will make enough interest to start spending, instead of hiding their money in their mattresses. They are the generation with the money, but are afraid to spend it or invest it in the stock market bubble. END THE FED!!. Bring back CAPITALISM!!

WayneWednesday, October 29, 2014 at 7:42 pm

With QE ending signals hard times for the economy. It has me very concerned that the economy might collapse. America is 15.5 some trillion dollars in debt seemingly without a way to pay on it.

Jack ChapmanWednesday, October 29, 2014 at 7:55 pm

So, Goldman Sucks is still at it. Imagine, after all these years yet! Gosh.

JeffWednesday, October 29, 2014 at 8:00 pm

Mike, talk about sympathy for folks looking to get a mortgage, I feel the pain. My wife and I have worked for forty years, good credit owned three homes in our forty two years of marriage. We have been renting for the past three years and finally decided to by another home. We thought as long as the interest rates are low let finance some of the purchase price. Oh my we’re we surprised at how unfriendlly, complicated, and absurd the paperwork. I don’t know how or why young people can subject themselves to such an daunting undertaking. I am really disappointed in how we continue to bail out the big banks and Wall Street and make things worse for us hard working middle class. I think they broke it and don’t know how or even care to fix it!

GeorgeWednesday, October 29, 2014 at 8:03 pm

Well, the Fed may have turned off the spigot but I can assure you they together with the Bg five banks will have in place a very good ponzi scheme with which to continue manipulating the stock market.

Who do you think are first to jump out of the market to cause a downturn and then first to jump jump back in when they have caused enough people to lose 5 or 10% of their hard earned money? All the time having their cronies extoll the virtues of buying just before dumping.

Churchill once said “You can fool some of the people some of the time but you can’t fool all of them all of the time” How appropriate is that ? except that most people don’t yet see it for what it is.

MeWednesday, October 29, 2014 at 8:07 pm

QE has pushed the stock market high in US and in many other countries in recent years for sure. Has it helped the real economy? I do not know as no comparison with the economy without it.
It seems many believe that the FD or the government should make their policies to keep the stock market going higher or at least not going lower. I do not see why it should be this way. High stock market only makes the richer richer, and these richer guys do not really help the real economy; it is the people in the middle and low classes who work, earn and spend money help the economy.

maqsoodWednesday, October 29, 2014 at 8:46 pm

good

Frederick OddiThursday, October 30, 2014 at 12:28 am

I think we are in the near future going to see a very rare economic cycle, an Inflationary Recession.

bobThursday, October 30, 2014 at 6:28 am

I find the story of the nurse to be seriously concerning. While the media is walking on eggs to say how good she is for volunteering the fact is that she is simply irresponsible. She showed her height of irresponsibility when she complained of having no showers and flush toilets while running a temp. What did she want her fluids to be released into the general sewerage systems while she was suspected of being infected? Hopefully she is not infected but the medical requirements were simply common sense.

HowardThursday, October 30, 2014 at 6:49 am

Hi Mike

I have a sneeking suspicion that the FED has created this growing US$4 trillion debt, not to help the public, but so the banks we rescued 6 years ago can rake in the growing interest rate returns. This, while retirees have been losing interest income. The FED can’t be that stupid as to run this bubble while main street struggles and believe they have made a difference.

SnojakThursday, October 30, 2014 at 7:33 am

For “Lord B.”: definition of ‘a few’ is 3. You honestly bought ONLY 3 shares of BABA and expect to leave your kids a windfall from it? Let’s be honest and say what ‘a few’ really means.

PeterWSunday, November 2, 2014 at 1:31 am

Frederick Oddi said: he looking to an inflationary Recession, I agree, however, if it has any legs, it will mean the Economic foundation, which is already falling apart, will collapse, then Chaos, complete with 100% losers.

The Western Governments will refuse any other Choice.

Illusionary winners oh yea.

Invest in Stocks for big Capital gains, perhaps 30%, but the smart one’s will invest in basic necessaries, they will continue to profit, even when the Collapse occurs.